Global washer and dryer manufacturer

Global washer and dryer manufacturer

1. For your first assignment, management has provided the following revenue and cost information: 

They want a better understanding of their business to make budgeting and sales goals decisions and have asked you to determine their:

1. Contribution Margins for each product line

 2. Break-even quantities for each product line 

3. Break-even quantities to earn $500,000 per year margin on the high-end line (at the current sales price)

 4. Break-even quantities to earn $300,000 per year margin on the economical line (at the current sales price) 

They expect the product lines to fully absorb the costs allocated to them. They have also asked that you show each step in your calculations so that they can understand your analysis. (Note: you will be graded on your intermediary values.)

Once you have determined these amounts, they have asked that you:

• present the information

 • describe how you performed your calculations 

• and explain what the results mean

2. Later, the company is considering the purchase of machinery and equipment to set up a line to produce a combination washer-dryer. They have given you the following information to analyze the project on a 5-year timeline:

• Initial cash outlay is $150,000, no residual value

. • Sales price is expected to be $2,250 per unit, with $595 per unit in labor expense and $795 per unit in materials. 

• Direct fixed costs are estimated to run $20,750 per month.

 • Cost of capital is 8%, and the required rate of return is 10%. 

• They will incur all operational costs in Year 1, though sales are expected to be 55% of break-even

. • Break-even (considering only direct fixed costs) is expected to occur in Year 2

. • Variable costs will increase 2% each year, starting in Year 3.

 • Sales are estimated to grow by 10%, 15%, and 20% for years 3 - 5. 

complete case study is attached below